Stock Yards Bancorp Reports Record 2022 Earnings and Strong Fourth Quarter Earnings of $29.8 Million or $1.01 Per Diluted Share

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Name : First name : From * : To * : (You can enter multiple email addresses separated by commas) Message : * Required fields LOUISVILLE, Ky. , Jan. 25, 2023 (GLOBE NEWSWIRE) -- Stock Yards Bancorp, Inc. (NASDAQ: SYBT), parent company of Stock Yards Bank & Trust Company , with offices in Louisville , central, eastern and northern Kentucky , as well as the Indianapolis, Indiana and Cincinnati, Ohio metropolitan markets, today reported record earnings for the fourth quarter ended December 31, 2022 , of $29.8 million , or $1.01 per diluted share. This compares to net income of $24.6 million , or $0.92 per diluted share, for the fourth quarter of 2021. Organic loan growth across all markets and expanded net interest margin (NIM) contributed to strong fourth quarter 2022 operating results.

(dollar amounts in thousands, except per share data) 4Q22 3Q22 4Q21 Net income $ 29,817 $ 28,455 $ 24,589 Net income per share, diluted 1.01 0.97 0.92 Net interest income $ 65,263 $ 62,376 $ 46,182 Provision for credit loss expense(6) 3,375 4,803 (1,900 ) Non-interest income 23,142 24,864 18,604 Non-interest expenses 45,946 44,873 34,572 Net interest margin 3.64 % 3.46 % 3.07 % Efficiency ratio(4) 51.85 % 51.30 % 53.24 % Tangible common equity to tangible assets(1) 7.44 % 6.78 % 8.22 % Annualized return on average equity(7) 15.99 % 14.85 % 14.60 % Annualized return on average assets(7) 1.56 % 1.47 % 1.52 % 'We delivered excellent fourth quarter and full year 2022 results, highlighted by strong loan growth, NIM expansion and improving capital levels since our merger earlier this past year,' said James A. (Ja) Hillebrand , Chairman and Chief Executive Officer. 'Strong fourth quarter net loan growth (excluding PPP loans) of $134 million was well diversified within loan categories and across all of our markets. While we generated the strongest annual organic loan growth year in our history, we anticipate overall growth moderating towards historical averages in 2023. On the linked quarter, total deposits declined $110 million , primarily due to the contraction in non-interest bearing demand deposit balances. While we are not seeing fallout within our customer base, we anticipate deposit pricing to be a challenge to future NIM expansion.' 'Non-interest income for the fourth quarter aligned with the prior quarter, and significantly exceeded the same period of the prior year. Solid wealth management and trust fees along with record treasury management and card income served to cap off a strong fee income year for us,' continued Hillebrand. 'Similar to the prior quarter, we executed several cost saving measures related to our first quarter Commonwealth Bancshares acquisition and disposed of certain overlapping properties, resulting in a non-recurring pre-tax gain of $1.3 million . Additionally, we sold our interest in an investment advisor subsidiary that we acquired from Commonwealth, resulting in a non-recurring pre-tax loss of $870,000 . This line of business was not within our geographic footprint and did not ultimately align with our long-term strategic model.' At December 31, 2022 , the Company had $7.50 billion in assets, $5.21 billion in loans and $6.39 billion in total deposits. The Company's combined enterprise, which encompasses 73 branch offices across three contiguous states, will continue to benefit from a diversified geographic footprint and provide significant growth opportunities in both the banking and wealth management arenas. Key factors contributing to the fourth quarter of 2022 results included: Total loans, excluding PPP loans, grew $134 million , or 3%, on a linked quarter basis. Total loan production remained strong for the fourth consecutive quarter.

, or 3%, on a linked quarter basis. Total loan production remained strong for the fourth consecutive quarter. Deposit balances declined $110 million , or 2%, on a linked quarter basis, as non-interest bearing demand deposit balances contracted $250 million offset by increases in interest bearing demand deposits.

, or 2%, on a linked quarter basis, as non-interest bearing demand deposit balances contracted offset by increases in interest bearing demand deposits. Net interest income increased $19.1 million , or 41%, for the fourth quarter of 2022 compared to the fourth quarter a year ago, consistent with the $1.14 billion , or 19%, increase in average earning assets and the increase in spread. Higher loan yields and volume more than offset significantly lower fee income recognition from the declining PPP loan portfolio.

, or 41%, for the fourth quarter of 2022 compared to the fourth quarter a year ago, consistent with the , or 19%, increase in average earning assets and the increase in spread. Higher loan yields and volume more than offset significantly lower fee income recognition from the declining PPP loan portfolio. NIM improved for the fourth consecutive quarter, increasing 18 basis points on a linked quarter basis to 3.64%.

Current credit quality remains solid; however, consistent with strong loan growth and the increase in the projected unemployment rate forecast used in modeling, $3.4 million of net credit loss expense (6) was recorded for the fourth quarter of 2022. Included in credit loss expense for the fourth quarter of 2022 was a $1.6 million specific reserve for a commercial real estate loan.

of net credit loss expense was recorded for the fourth quarter of 2022. Included in credit loss expense for the fourth quarter of 2022 was a specific reserve for a commercial real estate loan. Non-interest income increased by $4.5 million , or 24%, over the fourth quarter of 2021, as customer expansion and recent acquisitions once again drove record quarterly card income and treasury management fees. Also, as previously mentioned, the Company disposed of certain overlapping acquired properties, resulting in a non-recurring pre-tax gain of $1.3 million .

, or 24%, over the fourth quarter of 2021, as customer expansion and recent acquisitions once again drove record quarterly card income and treasury management fees. Also, as previously mentioned, the Company disposed of certain overlapping acquired properties, resulting in a non-recurring pre-tax gain of . Net new business growth and market improvement in both the fixed income and equity markets drove linked quarter improvements in wealth management and trust income, as well as growth in assets under management.

The Company sold its partial interest in an investment advisor subsidiary that was acquired from Commonwealth Bancshares in March of 2022, realizing a non-recurring pre-tax loss of $870,000 during the quarter.

in March of 2022, realizing a non-recurring pre-tax loss of during the quarter. Total non-interest expenses remained controlled and consistent with management expectations, generating an efficiency ratio of 51.85% (4 ) for the fourth quarter of 2022.

for the fourth quarter of 2022. Tangible book value per share was $18.50 (1) at December 31, 2022 , compared to $16.98 (1) at September 30, 2022 , and $20.09 (1) at December 31, 2021 . During 2022, tangible common equity and tangible book value have been significantly impacted by the marked increase in interest rates and the related negative impact on accumulated other comprehensive income/loss, leading to a $108 million reduction in equity, primarily as a result of unrealized losses in the available for sale debt securities portfolio. These securities, which management has the ability and intent to hold to maturity, are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Highlights for the year ended December 31, 2022 : Nine months of activity generated by the Commonwealth Bancshares merger exceeded management expectations and boosted overall operating results.

merger exceeded management expectations and boosted overall operating results. Loans (excluding PPP) grew $1.16 billion , or 29%, over the past 12 months with $630 million of the growth attributed to the acquisition.

, or 29%, over the past 12 months with of the growth attributed to the acquisition. Excluding the acquisition, organic loan growth totaled $529 million , or 13%, over the past 12 months.

, or 13%, over the past 12 months. Inclusive of the first quarter acquisition, deposit balances grew by $604 million , or 10%, over the past 12 months. Non-interest bearing deposits and interest bearing demand deposits represented $194 million and $410 million of the growth, respectively.

, or 10%, over the past 12 months. Non-interest bearing deposits and interest bearing demand deposits represented and of the growth, respectively. Higher loan yield expansion accompanied with a reduction in excess balance sheet liquidity led to NIM expanding 13 basis points in 2022 over 2021.

Wealth management and trust income reached and surpassed record levels during the year, increasing $8.5 million , or 31%, over the past 12 months, with net new business more than offsetting the current market volatility.

, or 31%, over the past 12 months, with net new business more than offsetting the current market volatility. Customer expansion and transaction growth have led to record 2022 card and treasury management income.

Hillebrand said, 'In November, we were once again nationally recognized by American Banker Magazine as one of the Best Banks to Work for in 2022. The Best Banks to Work For program identifies and honors U.S. banks for outstanding employee satisfaction. In addition, in September, we were one of 35 banks in the U.S. to be named a 'Sm-All Star' in Piper Sandler's annual list of top-performing small-cap banks. This elite annual list reflects the top 10% of the industry across a number of metrics including growth, profitability, credit quality and capital strength. We have now been named a Sm-All Star five times - 2008, 2011, 2019, 2020 and 2022. These recognitions are an honor and a testament to the dedication of our employees, who continue to work purposefully to support our communities.' 'During the fourth quarter of 2022, we published our inaugural Environmental, Social and Governance ('ESG') Corporate Responsibility Report,' Hillebrand continued. 'While ESG reporting is not mandatory, we believe it provides important information on our operations and management priorities. This report identifies ongoing practices and recent accomplishments in the areas of environmental risk and impact management, social responsibility, including diversity, equity and inclusion, and governance. We hold a strong commitment to developing and maintaining a solid ESG program, and this report allows us to give our stakeholders an even more transparent look into our best practices.' To learn more about the Bank's ESG efforts and view the report, please visit the ESG report tab under Resources at URL. Results of Operations – Fourth Quarter 2022 Compared with Fourth Quarter 2021 Net interest income, the Company's largest source of revenue, increased 41%, or $19.1 million , to $65.3 million , primarily due to average earning asset growth and rate increases. Organic growth, and to a greater extent the recent acquisitions, have boosted net interest income over the past 12 months. Total interest income increased by $27.6 million , or 58%, to $75.2 million . Interest income on loans increased $20.4 million , or 47%, over the prior year quarter. Consistent with the $1.07 billion increase in average non-PPP loans, and interest rate increases, the average quarterly yield earned on non-PPP loans increased 103 basis points over the past 12 months to 5.00%. PPP interest and fee income totaled $118,000 and $3.7 million for the fourth quarters of 2022 and 2021, respectively. Interest income on debt securities increased $5.5 million compared to the fourth quarter of 2021, driven by average balance growth of $687 million and significantly improved yields on recent purchases stemming from rising rates. Interest income on overnight funds increased $1.9 million over the prior year quarter. The FRB has increased the rate paid on reserve balances meaningfully during 2022, which has significantly benefitted interest income.

, or 58%, to . Total interest expense increased $8.6 million to $9.9 million , as the cost of interest bearing liabilities increased 72 basis points to 0.86%.

to , as the cost of interest bearing liabilities increased 72 basis points to 0.86%. NIM expanded 57 basis points to 3.64% for the fourth quarter of 2022, from 3.07% for the fourth quarter a year ago, primarily due to higher loan yields and volume, which more than offset significantly lower fee income recognition from the declining PPP loan portfolio. The Company recorded $3.4 million in provision for credit losses(6) during the fourth quarter of 2022, which included a $3.6 million provision for credit losses on loans and a $225,000 benefit to credit loss expense for off-balance sheet exposures. Significant loan growth during the quarter and the increase in the unemployment projection drove additional provision expense within the CECL allowance model. In addition, the Bank recorded a $1.6 million specific reserve for a commercial real estate loan during the fourth quarter of 2022. This was the primary driver of the increase in non-performing loans for the quarter. Non-interest income increased $4.5 million , or 24%, to $23.1 million , with the recent acquisitions contributing significantly to revenue growth. Wealth management and trust income ended the fourth quarter of 2022 at $9.2 million , increasing $1.8 million , or 25%, over the fourth quarter of 2021. Net new business growth and market improvement in both fixed income and equity markets drove the linked quarter improvement in assets under management and asset-based fees.

, increasing , or 25%, over the fourth quarter of 2021. Net new business growth and market improvement in both fixed income and equity markets drove the linked quarter improvement in assets under management and asset-based fees. Card income increased $1.0 million , or 26%, over the fourth quarter of 2021, as card activity continues to benefit from generally strong spending trends and customer expansion.

, or 26%, over the fourth quarter of 2021, as card activity continues to benefit from generally strong spending trends and customer expansion. Treasury management fees increased $407,000 , or 22%, driven by increased transaction volume, expanded foreign exchange income, new product sales and both organic and acquisition-related customer base expansion. Continued calling efforts and the Company's ability to generate new fee income has been the catalyst for this growth trend.

management fees increased , or 22%, driven by increased transaction volume, expanded foreign exchange income, new product sales and both organic and acquisition-related customer base expansion. Continued calling efforts and the Company's ability to generate new fee income has been the catalyst for this growth trend. Mortgage banking income, which primarily consists of gain on sale of loans, net servicing income and mortgage servicing rights amortization, totaled $209,000 for the fourth quarter of 2022, down significantly compared to the fourth quarter a year ago. Overall volume in 2022 has cooled dramatically consistent with rising interest rates.

for the fourth quarter of 2022, down significantly compared to the fourth quarter a year ago. Overall volume in 2022 has cooled dramatically consistent with rising interest rates. Consistent with the third quarter of 2022, the Company disposed of certain overlapping properties acquired from the March Commonwealth acquisition, resulting in a non-